Ernie Jarvis: Our Broken Broker Culture

Ernie Jarvis

WASHINGTON, DC—Ernie Jarvis officially opened the doors to his new firm , Jarvis Commercial Real Estate, earlier this month with a party attended by DC’s who’s who in commercial real estate: Doug Firstenberg  and George Carras of StonebridgeCarras, Jim Dinegar from the Greater Washington Board of Trade, Mayor Bowser’s senior advisor Beverly Perry, Deputy Mayor of Economic Development Brian Kenner, Councilmember Jack Evans, DCBIA president Lisa Mallory, Greg Fazakerley, the founder DRI Development (and one of the investors in Jarvis Commercial Real Estate) and Jamie Williams of the Carlyle group. All told, there were nearly 200 brokers at the event. Clearly Jarvis has the chops to bring out such a crowd for what is essentially the launch of a start up, which would also suggest he knows what he is doing with this go-it-alone approach. (He has spent years with First Potomac Realty and CBRE). All of which makes it double interesting that he is basically rejecting just about every established business practice on which most commercial real estate brokers stake their revenues. Indeed, Jarvis’ goal with this launch — besides, presumably making a living — is to create a company that looks nothing like the current the brokerage culture, he tells GlobeSt.com. A snarky person might say, ‘well, what else can Jarvis do but create something new as he goes about hiring for his firm?’ He cannot compete on commissions or signing bonuses; he can’t promise potential hires that the firm will bring in lucrative, global services contracts. But one gets the sense that even if Jarvis could offer all this — and the scale to support it — he wouldn’t. The next-generation of brokers coming up are sick of the BS that accompanies all this, he said. And so is he. “Brokers are tired of commission disputes — and those happen a lot in the bigger firms. They want a happier work environment in which they can thrive and have their careers nurtured.” As for Jarvis himself, “I am not interested in any of that, or of growing into a big company,” he says. “I have read that book, seen that movie.” I caught up Jarvis shortly before his office officially launched. Following are excerpts from the long and very candid interview…. About Those $100,000 Signing Bonuses GlobeSt.com: I never can get people to spill on the record about broker practices! So tell me, is it true about the signing bonuses? I have heard that one or two of the national companies that are aggressively expanding right now are offering $100,000 in signing bonuses and five-year contracts. Is that true and do you really think you can compete with that? Jarvis: (laughing) I’ve heard that too and yes I can compete with that. For starters, a signing bonus of that size is for brokers higher up on the food chain and that is not who I am looking for right now. But, since you bring it up, those signing bonuses can become a burden because it is assumed that the new hire’s revenues will meet or exceed a certain threshold. And let me tell you, clients can sense when a broker is just looking to earn a fee. That is why I am not focusing so much on commissions either. PILOTs at the Dinner Table GlobeSt.com: I want to ask you about commissions, but first –  who are you looking for then? Jarvis: Someone who will fit into DC’s real estate community and thrive. And hopefully someone who loves this city as much as I do. Change is happening and it is very exciting. As you drive through H street and NoMa and Columbia Heights you can feel the excitement. GlobeSt.com: I understand you have very deep roots here, reaching back several generations. Jarvis: Yes, my mother is Charlene Drew Jarvis. She was a five-term representative on DC’s City Council, from 1979 to 2001. She lost to some upstart named Adrian Fenty (he laughs). So I grew up with this. At our dinner table we talked about PILOT programs, TIFs, Industrial Revenue Bonds, we talked about all of the arrows in the quiver that the District government created to incent companies to come here. Tired of Commission Disputes GlobeSt.com: So when you talk about brokers wanting something new, what exactly do you mean? Jarvis: I’ve talked to a number of brokers who tell me they don’t think they would like being in a corporate, regimented environment.  Or the ones with some years of experience will tell me they are tired of commission disputes, which can be frequent in a company with, say, 100 brokers. When a group of brokers execute a transaction there can be disagreements about who identified the business, how much each did to execute the deal and so on. A More Generous Commission Split GlobeSt.com: Let’s talk about commissions. I am assuming you are offering some percentage of a transaction? Jarvis: It will depend on the broker, his or her experience, and relationships but I can tell you it will generally be much more advantageous than the larger companies. GlobeSt.com: You won’t get more specific? Jarvis: (laughs) Nope. GlobeSt.com: Well, give me a sense of what a larger company offers for comparison’s sake. Jarvis: For sales there is no standard – everything is negotiable between the brokerage company and the client. In fact, standardization of fees is against the law.  As for the company splitting the commission with the brokers, that is usually 50-50, as a starting point, with negotiation wiggle room for seniority, title and overall production. GlobeSt.com: I can see what you can offer brokers but I am wondering how will you compete for business? I realize you are emphasizing your hyper local knowledge but frankly the big brokers have that too. Will it be service? Competing on Price Jarvis: That yes, but mainly price. GlobeSt.com: Price?! How’s that? Jarvis: Well, I just explained it too you. The fees are negotiable. The larger brokers, especially the publicly-traded ones, have to feed Wall Street, they have to maintain their EBITDAs. They are less inclined to reduce fees. We are small and I have no interest in feeding Wall Street. GlobeSt.com: This will be fun to watch. Jarvis: I’m planning on it. Work should be fun.